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First quarter 2015 sanctions update

In the first three months of 2015, the U.S. government has been – as usual – quite busy on the sanctions front. President Obama has eased sanctions on Cuba, expanded sanctions on Russia and Venezuela, and introduced sanctions against cyber criminals. And that does not even include Iran (with which agreement was reached on April 2) or the government’s continued, aggressive enforcement.

What follows is our effort to briefly summarize key sanctions developments since the beginning of the year, and to offer predictions about potential new developments in the coming months.

Cuba. Last December, to the surprise of many, President Obama announced plans to ease the comprehensive economic sanctions the United States has maintained against Cuba for the past, well, forever. This announcement was followed in January by the Treasury and Commerce Departments issuing amended regulations to begin implementing changes the President had announced. Under the amended regulations, many previously restricted types of activity are now permitted, including the following:

Broader authorization to send remittances, gift parcels, and humanitarian donations to Cuba, and for personal travel to the island;

Activities in Cuba in support of official business of, and contracts with, the U.S. and non-U.S. governments and certain intergovernmental organizations;

Exports of certain goods, including consumer communications devices, building materials and equipment for private sector construction, and goods and technology in support of scientific, ecological, sporting and other cultural activities; and

In addition, at the end of March, Treasury announced that it would remove 59 Cuban parties from the List of Specially Designated Nationals (SDNs) and Blocked Persons. Perhaps this was largely symbolic, but it also evidences a means by which the Obama Administration may be able to further ease sanctions on Cuba without Congressional action.

Our view. While there are some new opportunities related to Cuba, it is too soon for most U.S. businesses to engage with Cuba as a viable commercial partner. That said, we think the train has left the station, and it is merely a matter of time (though maybe a long time) until sanctions are eliminated entirely. It is hard to imagine that the steps taken to ease sanctions on Cuba so far will be reversed.

Russia / Ukraine. In some ways, the most notable development in the first quarter of 2015 with respect to Russia and Ukraine was the lack of developments – especially compared to the first quarter of 2014, when Treasury was prolific. But there was some action. First, in January, OFAC issued three general licenses, including one to authorize certain transactions related to telecommunications. Then, in March, OFAC designated another14 individuals and two entities as SDNs pursuant to the Ukraine-related sanctions program.

Our view. We think the U.S. government will continue to slowly ratchet up pressure on Russia through the designation of additional individuals and entities on the SDN List or the Sectoral Sanctions Identifications List. The authority to make such designations, as established by the Executive Orders issued by President Obama in March 2014, is very broad – we expect the Obama administration to keep using that authority on a targeted basis for the foreseeable future.

Venezuela. Towards the end of 2014, the Obama Administration introduced new restrictions on exports to, and transactions with, Venezuela. In November, the Export Administration Regulations were amended to restrict exports to Venezuela for "a military end use or end user;" in December, President Obama signed into law the "Venezuela Defense of Human Rights and Civil Society Act of 2014."

Most recently, in March, President Obama issued Executive Order 13692 imposing asset-blocking and exclusion sanctions against persons found to have committed acts to restrict the freedom of, or otherwise harm, the Venezuelan people. The Order also authorized the President to designate any current or former government Venezuelan official, as well as any individual or entity controlled or owned by, or acting on behalf of, a designated person.

While only a few individuals have been designated to date, the Executive Order establishes a broad framework pursuant to which other individuals and entities may soon be designated.

Our view. We think the United States' approach to Venezuela is likely to mirror the approach to Russia. Having established the broad authority to sanction Venezuelan parties, the Obama Administration is likely to introduce sanctions against new parties periodically in the hopes of slowly but surely squeezing the country's elite.

Iran. There was no lack of action or news about Iran during the first quarter of the year. Nor was there a deal to extend the existing Joint Plan of Action – under which the United States has maintained a slightly more permissive sanctions regime with respect to Iran since late 2013.

And while an agreement was reached on April 2, as OFAC announced on its website the next day:

The parameters announced on April 2, 2015 for a Joint Comprehensive Plan of Action (JCPOA) by the P5+1 and Iran do not immediately relieve, suspend or terminate any sanctions on Iran. The only sanctions relief in force is the relief provided pursuant to the Joint Plan of Action (JPOA) reached on November 24, 2013 and extended through June 30, 2015.

The parameters announced on April 2, 2015 provide a path for sanctions on Iran to be suspended and eventually terminated in exchange for IAEA verified implementation by Iran of its key nuclear commitments.

As of today and until a JCPOA is concluded, other than the sanctions relief provided under the JPOA, all U.S. sanctions remain in place and will continue to be vigorously enforced.

The sanctions relief provided for under the JPOA reached on November 24, 2013 remains in effect, as described on Treasury’s website.

Likewise, anyone owned or controlled by or acting on behalf of a designated party is themselves subject to property blocking and entry restrictions.

For the moment, no party has been designated under these Cyber Sanctions. Thus, as Treasury noted in guidance posted on its website on April 1 (specially, Frequently Asked Question Number 445), there are "no specific steps that U.S. persons need to take right now in order to comply with" this new Order.

Our view. This is another situation where the U.S. government has created the infrastructure to facilitate the designation and block the property of a wide array of cyber mischief makers. We expect that designations will be forthcoming. This sanctions regime could get interesting depending on who is designated, especially if government parties – in China, for example – are targeted.

Conclusion. It has been another eventful three months in the world of U.S. sanctions. The forthcoming three months are likely to be similar – even if we cannot guess what the next U.S. sanctions target may be. Perhaps Yemen? Maybe sanctions will be re-introduced to Burma? Or of course some new sanctions target may emerge. At this point, we can only be confident that the U.S. government will continue to use U.S. sanctions to achieve its policy objectives, and those sanctions programs already in place will continue to ebb and flow with the geopolitical tides.

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